Momentum sounds like jargon, but the core idea is simple:

• Stocks that have done well recently tend, on average, to keep doing well for a while.
• Stocks that have done badly tend, on average, to keep struggling for a while.

Momentum investing is just a systematic way of using that tendency, instead of chasing stories or tips.

On Axe, that means using price data and relative strength to stay with leaders while their trend is intact, and to rotate out when they clearly fall behind.

What “momentum” actually means
In markets, momentum is usually measured as the rate of change of returns over a recent period:

• You look at how much a stock has moved over, say, the last 6–12 months.
• You compare that to other stocks in the same universe (large-cap vs large-cap, small-cap vs small-cap).
• The ones that are stronger than the pack have higher momentum.

Two things matter:

• Absolute trend – has the stock actually made positive returns over the lookback period, and is that move more than just a one-day spike?
• Relative strength – has it done better than other stocks in the same basket?

  Axe portfolios lean toward stocks that score well on both.

Does momentum really work? (The evidence, not the hype)
Momentum is one of the most studied effects in finance.
Across decades of data:

• In US and other developed equity markets, classic research has found that simple “buy recent winners, avoid losers” rules have historically added roughly 8–12 percentage points per year over the market, before costs, when applied consistently over long periods.
• Similar patterns have been documented in Europe, the UK, Japan and emerging markets, including India, and even in other asset classes like commodities and currencies.
• In India, multiple academic and practitioner studies on large-cap baskets have found that straightforward price-momentum portfolios have outperformed broad indices over 10+ year windows, especially in bull or trending phases, while doing worse in sharp reversals and deep bear markets.


The exact numbers depend on the universe, rules and costs, but the broad takeaway is:
Momentum has been a persistent, measurable effect across markets and timeframes — not just a one-cycle fluke.

That doesn’t make it a guarantee. It means there is a real edge with real risk attached.

Why momentum can exist at all (behavior, not magic)
If markets were perfectly efficient and every investor reacted instantly and rationally, momentum shouldn’t exist.
In practice, a few very human habits help trends persist:

• Under-reaction:
When good or bad news arrives (earnings surprises, policy changes, new orders), prices often don’t adjust fully on day one. The stock drifts in the same direction over weeks or months as more investors react.
• Herding & FOMO:
Once a theme starts working (PSUs, manufacturing, defense, small-caps, etc.), flows pile into the same names. People don’t want to miss what everyone else is talking about. That pushes trends further than models would predict.

• Confirmation bias:
After buying a stock, many investors seek information that supports the decision and ignore warnings. They hold on too long, letting trends run (both up and down) more than pure “rational” behavior would.

• Overconfidence:
A few good calls make investors think they “know” a stock or sector. They size up or delay exits, extending the life of trends.


Momentum strategies don’t try to psychoanalyze every move. They simply accept:
Prices often adjust gradually, not instantly. That gradual adjustment creates trends. Trends can be measured and followed.

How Axe uses momentum inside portfolios
On Axe, momentum isn’t a one-off screen. It is built into full portfolio rules.
At a high level, the process looks like this:

a) Start with a clear universe

Each portfolio has a defined playground:

• Large-cap sleeves may draw from something like the top 200–250 names by market-cap.
• Midcap, small-cap and micro-cap sleeves use their corresponding segments.

This keeps comparisons fair (a small-cap isn’t “competing” with a mega-cap) and ensures everything is investable and liquid enough.

b) Measure trend and relative strength

For every stock in that universe, the model looks at:

• Returns over short and intermediate look back windows (for example, a mix of 3-6 and 12-month price behavior).
• How those returns compare to other stocks in the same universe (relative strength).
• Whether the move looks persistent (follow-through) rather than a one-day event spike.


The strongest names (on this combined score) are the “leaders” for that cycle.

c) Apply investability and risk filters

• illiquid names,
• highly crowded trades, or
• stocks with unmanageable volatility.

So Axe portfolios layer on:

• Liquidity gates – minimum trading activity before a stock is even eligible.
• Stock and sector caps – so one name or theme can’t quietly become 20–30% of the basket.
• In some sleeves, basic quality or volatility checks – to avoid the most fragile or erratic profiles.

The goal is not to make momentum “safe”, but to make it practical and tradable.

d) Rebalance on a schedule

Trends evolve. New leaders emerge, old leaders fade.
To keep up, Axe portfolios are rebalanced on a fixed rhythm (for example, monthly):

• At each rebalance, the universe is re-scored.
• Stocks that still rank well and pass filters usually stay.
• Stocks whose momentum or liquidity has clearly broken fall out and are replaced by higher-ranked names.

You’ll often see this described as “monthly, rules-led refresh” in the portfolio description. That’s what it means.

Where momentum goes wrong (and why that’s normal)
Momentum has a real edge, but it also has predictable pain points:

• Sharp regime flips:

  When markets suddenly switch from “risk-on” (small-caps, cyclicals, high beta) to “risk-off” (defensives, large-caps, cash), the previous winners can reverse fast. Momentum portfolios that were full of yesterday’s leaders need a cycle or two to fully rotate.

• Sideways, choppy markets:

  When there is no clear leadership and prices just whipsaw, momentum signals are weaker. Portfolios may rotate more and deliver flatter or more frustrating paths.

• Higher drawdowns in aggressive sleeves:

  Momentum built on small-cap or micro-cap universes will usually show bigger swings, both up and down, than large-cap or multi-cap strategies.

Axe designs risk bands, position sizing and rebalancing rules to make this manageable, not to make it disappear. If you use a momentum sleeve, you are accepting:

“I’m okay with some uncomfortable periods in return for a style that historically has added excess return over the long term.”

What this means for you as an investor
Putting it all together:

• Momentum is a data-driven way to back what’s working now, rather than what used to work.
• The edge shows up over many cycles, not over one month or one quarter.
• Momentum portfolios on Axe:

  • operate in defined universes,

  • use explicit rules to pick leaders,

  • have visible risk caps and rebalance schedules, and

  • will clearly state their risk level (from calmer large-cap sleeves to high-energy small/micro sleeves).


Your job is not to fine-tune the signals. Your job is to decide:

• whether a rules-based, momentum-led style fits your risk appetite and behavior, and
• what portion of your overall equity allocation (if any) should sit in such strategies.


If the style fits, momentum can be a powerful building block alongside other approaches. If it doesn’t, forcing yourself into it will feel wrong every time markets turn.

Disclaimer: Examples and historical characteristics of momentum are for illustration only and do not imply or guarantee future performance. Momentum strategies can involve higher turnover, higher costs and deeper drawdowns, especially in volatile or reversing markets. Always align any momentum allocation with your own risk profile and financial goals.